Question

Brummer Corporation makes a product whose variable overhead standards are based on direct labor-hours. The quantity standard is 0.1 hours per unit. The variable overhead rate standard is $8.00 per hour. In January the company produced 8,700 units using 910 direct labor-hours. The actual variable overhead rate was $7.90 per hour. The variable overhead efficiency variance for January is:________

a. $320 F
b. $316 U
c. $320 U
d. $316 F

Answer 1

Answer:

c) Variable overhead efficiency variance =  $320 Unfavorable

Explanation:

The variable overhead efficiency variance is the difference between the actual hours and the standard hours for the actual output valued at the standard variable overhead rate per hour.

                                                                                      Hours

8700 units should have taken (8700× 0.1)                   870

but took                                                                           910

                                                                                         40   Unfavorable

× Standard rate per hour                                       ×        $8

Variable overhead efficiency variance                      $320 Unfavorable

Variable overhead efficiency variance =  $320 Unfavorable